Tax incentive for foreign language centers

Legal grounds

• Circular 78/2013/TT-BTC
• Circular 96/2015/TT-BTC
• Circular 03/2011/TT-BGDDT
• Decision 1466/QD-TTG
• Decision 1470/QD-TTG

Standard corporate income tax (CIT) rate of the foreign language centers

A foreign language center does not qualify for CIT incentives, the standard tax rate of 20% would be applied.

Conditions for foreign language centers to enjoy tax incentives 

To enjoy tax incentives, a foreign language center must meet the following requirements:

• Applying fully Vietnamese Accounting Standards and
• Getting a Decision permitting the establishment of a foreign language center from the Department of Education and Training; or
• Meets the criteria for scale, type and standards of establishments implementing socialization in the field of education as follows:

Preferential CIT rates of foreign language centers

For foreign language centers that qualify for tax incentives, the CIT rate is applied as follows:

• CIT exemption for 4 years (calculated from the year of taxable income, or from the year of revenue but no taxable income).
• 50% tax reduction in the next year.
• During the operation, a preferential tax rate of 10% applies.

For example

In 2020, ACB company headquartered in Ho Chi Minh City operates in the field of foreign language teaching, approved by the Ministry of Education and Training of Ho Chi Minh City issued a license to establish a foreign language center. In 2020, because ACB company was in the investment stage, it has no revenue yet. In 2021, the company will start to have revenue and taxable income, so the time to enjoy CIT incentives is calculated as follows:

Revenue from selling books and school stationeries eligible for tax incentives?

• During the incentive period, if a company operating many business activities, it must separately calculate income from business activities eligible for tax incentives.
• According to Circular 78/2013 regulations, CIT incentives are only implemented on revenue from teaching activities. Income from selling books or teaching stationeries is not eligible for CIT incentives.

Value-added tax (VAT) rate of foreign language center?

For teaching services

Teaching services at foreign language centers are not subject to VAT.

Selling books and school stationeries

The activities of selling books and school stationeries of foreign language centers are subject to VAT at the tax rate of 5% or 10%, depending on the items sold.